The Securities and Exchange Board of India (SEBI) has notified the Issue of Capital and Disclosure Requirements (‘ICDR Regulations’) (Third Amendment) Regulations, 2025 (‘ICDR amendment 2025’) on 31st October 2025[MMJC1] [1]. These amendments will come into force on 30th day from the date of publication in official gazette. So, these provisions will come into effect from 30 November 2025. The Schedule XIII, Part A, paragraph 10 of the SEBI (ICDR) Regulations, 2018.
The provisions governing anchor investor allocations in IPOs made through the book-building process are amended by ICDR amendment 2025.
The Role of Anchor Investors
In a book-built IPO, issuers can allocate up to 60% of the Qualified Institutional Buyer (QIB) portion to “anchor investors”. These large institutions allotted shares one working day before the issue opens. The allocation is made on a discretionary basis, following detailed conditions under Schedule XIII of the ICDR Regulations[MMJC2] [2].
Under the earlier framework (before ICDR amendment 2025[3]):
1. Up to 15 anchor investors were permitted for allocations up to ₹250 crore.
2. For larger issues, additional 10 investors were allowed for every additional ₹250 crore or part thereof.
3. Each investor had to receive at least ₹5 crore worth of shares.
4. One-third of the anchor portion was reserved for domestic mutual funds.
Over time, this structure became restrictive and out of step with current market realities, prompting SEBI to issue a consultation paper in July 2025.
Rationale for Change
In its consultation paper[4], SEBI noted that the number of permitted anchor investors had not kept pace with the size and complexity of modern IPOs. Several concerns were raised by stakeholders, particularly by foreign portfolio investors (FPIs). Each FPI fund is treated as a separate application since every fund has a distinct PAN, even when the beneficial owner is the same. This often led to exhaustion of the limited “anchor lines,” making it difficult for large global funds operating multiple vehicles to participate fully.
Mutual funds, on the other hand, are treated as a single investor group since they share a common PAN, giving them an unintended advantage. Given that most IPOs on the main board are now well above ₹500 crore, and the average issue size exceeds ₹3,000 crore, the lowest category of anchor allocation (up to ₹10 crore) had become redundant.
SEBI concluded that expanding the number of permissible anchor investors and merging smaller categories would enable broader and fairer participation, especially for large FPIs and global funds, and result in more diversified anchor books. This, in turn, would aid better price discovery and bring long-term institutional capital into IPOs.
The Amendment
The ICDR Amendment 2025 simplifies and expands the anchor framework as follows:
1. Investor Limits and Minimum Allotment
a. For allocations up to ₹250 crore: a minimum of 2 and a maximum of 15 investors, each receiving at least ₹5 crore.
b. For allocations above ₹250 crore: a minimum of 5 and a maximum of 15 investors for the first ₹250 crore, and 15 additional investors for every further ₹250 crore or part thereof, again with a minimum ₹5 crore allotment each.
2. Reservation Within Anchor Portion
a. 40% of the total anchor investor portion is to be reserved for specific domestic institutions:
i. 33.33% for mutual funds, and
ii. 6.67% for life insurance companies and pension funds.
b.Any shortfall in the insurance/pension category may be allotted to mutual funds.
This marks the first time that life insurers and pension funds have been given an explicit share in anchor allotments, recognising their role as long-term, stable investors.
Implications and Transitional Questions
With several IPOs already in various stages of filing, issuers and merchant bankers have sought clarity on how these rules will apply to ongoing issues. The following questions summarise the main transitional scenarios.
Q1. If the DRHP is filed before 30 November 2025 but the RHP is filed later, do the new rules apply?
Q2. If the RHP is filed before 30 November 2025 but the issue (and anchor allotment) opens after that date, will the amendment apply?
SEBI has already specified that the ICDR Amendment 2025 will come into effect 30 days from the date of publication, i.e., around 30 November 2025. The relevant date for determining compliance is the date of the anchor investor allotment, which takes place one working day before the issue opening. Therefore, companies must comply with the amended provisions if the date of anchor allocation falls on or after the amendment’s effective date.
The Red Herring Prospectus (RHP) and related documents should also be prepared and filed in line with this applicability, ensuring that the disclosures reflect the updated framework wherever the public issue opens after the amendment becomes effective.
Conclusion
The ICDR amendment 2025 modernises the anchor investor framework to reflect the size and diversity of India’s capital markets. By permitting more investors per ₹250-crore block and broadening the category to include life insurance and pension funds, SEBI aims to deepen institutional participation, enhance valuation credibility, and promote long-term market stability. For issuers, the guiding principle remains clear; compliance is determined as on the date of the public issue and offer documents must align with the regulations in force at that time.
[1] https://www.sebi.gov.in/legal/regulations/nov-2025/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-third-amendment-regulations-2025_97635.html
[2] 3Schedule XIII, Part A, paragraph 10 of the SEBI (ICDR) Regulations, 2018
b) Up to sixty per cent. of the portion available for allocation to qualified institutional buyers shall be available for allocation/allotment (“anchor investor portion”) to the anchor investor(s).
c) Allocation to the anchor investors shall be on a discretionary basis, subject to the following:
(I) In case of public issue on the main board, through the book building process:
(i) maximum of 2 such investors shall be permitted for allocation up to ten crore rupees
(ii) minimum of 2 and maximum of 15 such investors shall be permitted for allocation above ten crore rupees and up to two fifty crore rupees, subject to minimum allotment of five crore rupees per such investor;
(i) in case of allocation above two fifty crore rupees; a minimum of 5 such investors and a maximum of 15 such investors for allocation up to two fifty crore rupees and an additional 10 such investors for every additional two fifty crore rupees or part thereof, shall be permitted, subject to a minimum allotment of five crore rupees per such investor.
(II) In case of public issue on the SME exchange, through the book building process:
(i) maximum of 2 such investors shall be permitted for allocation up to two crore rupees
(ii) minimum of 2 and maximum of 15 such investors shall be permitted for allocation above two crore rupees and up to twenty five crore rupees, subject to minimum allotment of one crore rupees per such investor;
(iii) in case of allocation above twenty five crore rupees; a minimum of 5 such investors and a maximum of 15 such investors for allocation up to twenty five crore rupees and an additional 10 such investors for every additional twenty five crore rupees or part thereof, shall be permitted, subject to a minimum allotment of one crore rupees per such investor.
d) One-third of the anchor investor portion shall be reserved for domestic mutual funds.
[4] https://www.sebi.gov.in/reports-and-statistics/reports/jul-2025/consultation-paper-on-facilitating-ease-of-doing-business-relating-to-anchor-investor-allocation-long-term-institutional-participation-and-retail-quota-in-initial-public-offerings-ipo-under-icdr-re-_95748.html
[MMJC1]Add link of amendment
[MMJC2]Quote relevant provisions in footnote for this
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